DOJ action takes bite out of stock of United, other airlines

A United Airlines jet taxis at O'Hare International Airport. (Chris Sweda, Chicago Tribune)

Airline stocks fell on Tuesday after the Department of Justice sued to block the combination of US Airways and American Airlines, the last in a wave of major airline mergers.

The segment's declines were led by US Airways, which at one point fell 13 percent on the possibility that a long hoped for combination would not come to fruition. The parent company of United Airlines, currently the world's largest carrier, was down more than 7 percent.

The stock of American Airlines' parent AMR Corp. was delisted when it filed for Chapter 11 bankruptcy in November 2011. The combination with US Airways is part of its plan to reorganize and emerge from court protection.

Airline experts say the combination of American and US Airways will provide for a healthier industry and allow carriers to compete more effectively by cutting costs and raising prices. But the DOJ said it was concerned the tie-up would hurt fliers by allowing carriers to get too big, especially at key airports where they have a big presence, like New York's LaGuardia and Reagan National in Washington D.C.

In midday, US Airways shares lost almost 13 percent, to $16.36. The parent of United, which would lose its crown as the world's largest airline if the American-US Air deal goes through, fell 7.47 percent, to $30.73. Southwest shares fell 1.82 percent, to $13.47.